The fact that most transfer payments in the United States are not meanstested leads to something of a paradox: some transfer payments involve taxing people whose incomes are relatively low to give to people whose incomes are relatively high Social Security, for example, transfers income from people who are working to people who have retired But many retired people enjoy higher incomes than working people in the United States Aid to farmers, another form of non-means-tested payments, transfers income to farmers, who on average are wealthier than the rest of the population These situations have come about because of policy decisions, which we discuss later in the chapter KEY TAKEAWAYS One role of government is to correct problems of market failure associated with public goods, external costs and benefits, and imperfect competition Government intervention to correct market failure always has the potential to move markets closer to efficient solutions, and thus reduce deadweight losses There is, however, no guarantee that these gains will be achieved Governments may seek to alter the provision of certain goods and services based on a normative judgment that consumers will consume too much or too little of the goods Goods for which such judgments are made are called merit or demerit goods Governments redistribute income through transfer payments Such redistribution often goes from people with higher incomes to people with lower incomes, but other transfer payments go to people who are relatively better off Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 800